Banks charging high rates of interest on their credit cards are forcing those who are already in debt into further problems rather than discouraging lending, it has been stated.

This is the opinion of Phil Perry, director of Ark Financial Planning, who said that instead of doing people a favour and discouraging borrowing, what is happening is those in debt are being trapped in a vicious circle.

He added that for many people the only form of credit they can currently obtain is through a credit card, so they have been forced to continue this form of borrowing, even though they know the interest will be high.

These comments follow the news that credit card interest levels are at the highest they have been for the past 12 years, according to moneyfacts.co.uk, with the average rate currently standing at 18.8 per cent.

Borrowers will now be paying back £2,289 more on a loan of £5,000 than they would have in February 2006.

House prices have already started to increase this year, according to the latest figures from Nationwide.

So far this month the average house price has increased by 1.2 per cent, which is a year-on-year growth of 8.6 per cent.

The current average price of a property is £163,481, which is an increase on December’s value, which was around 5.9 per cent more than it had been the year previously.

Meanwhile, the three month on three month rate of change dipped slightly from 2.3 per cent in December to 2.1 per cent in January

Martin Gahbauer, Nationwide’s chief economist, said: “Unless there is a fall in property values in February, annual house price inflation is likely to move into double-digit territory next month for the first time since May 2007.”

Nationwide has been making some changes to its products in the mortgage market recently, as it announced it was cutting the rates on selected fixed and tracker products.